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Is my credit card or personal loan debt legal?
Many firms have sprung up claiming on their websites or in their advertisements to be able to get you out of your credit card or personal loan debt. How can this be you may ask? And it may be difficult to discover the true position.
Much of the hype and information surrounding this issue is incorrect or misleading but it is true that in some cases lenders are unable to issue legal proceedings to recover monies they claim are owed to them. This is because some of their credit agreements lack 'prescribed terms' and are 'irredeemably unenforceable'. I have spoken with solicitors and been to the Law Society and can now report the facts as follows:
Background
The Consumer Credit Act 1974 (The Act) was brought in to safeguard the public from unscrupulous lenders. The Act requires certain credit and hire arrangements to be set out in a particular way and to contain certain information in order to be enforceable.
The Act was so worded that if lenders did not comply with the provisions of the Act, they would be unable to enforce repayment of the loan in a court, it was not however, the intention to trip up major banks or credit card companies which may have unintentionally failed to observe all the rules by not containing the prescribed terms, and thereby render their credit agreements unenforceable.
The current Position
In such cases where the agreement was signed before 6 April 2007 the lender can apply to a court for an enforcement order. However there are certain circumstances in which the court does not have power or jurisdiction to enforce the agreement. It therefore remains unenforceable and the lender is unable to recover any money, in legal proceedings, from the borrower.
For agreements made on or after 6 April 2007 the court now has discretion under the Consumer Credit Act 2006 to enforce an agreement which does not comply with the Act's requirements. The court must consider the prejudice that would be suffered by the borrower if it were decided to enforce the agreement, against the prejudice that would be suffered by the lender if the court decided against enforcing it.
On the 21st May 2009 the Judicial Communications Office issued a statement. Contrary to some reports, there is no general stay on cases challenging the enforceability of Consumer Credit Agreements. We monitor this and report updates at www.debtwizard.com
If you would like to know whether your credit agreement is unenforceable then you will need to consult either a Claim Management Company, (CMC) or solicitor.
Claims made by Claims Management Companies, CMCs
There are companies claiming that 80% of agreements are unenforceable and they will want to charge you a fee to get rid of your debt, sometimes charging you a percentage of the amount you have 'saved'. Some may also claim to get you compensation. These companies should not be giving guarantees or making promises to get you out of your debt and consumers have been asked by the Ministry of Justice, which monitors claims management companies, to report to them any which are operating in an unacceptable way.
Whilst in certain circumstances some agreements may be unenforceable, many are. If you mistakenly believe your agreement is unenforceable and are not making repayments you may be incurring additional default charges and legal costs.
Ministry of Justice - Claims Management Companies
Firms that provide regulated claims management services must be authorised by the Regulator. You can easily search on line to see if the 'claim management firm' is regulated.
Solicitors
Solicitors are regulated by the Solicitors Regulation Authority www.sra.org.uk and are qualified to give you legal advice.
Mis-leading adverts or statements
Below is a list of the types of statement that are causing concern, along with an example for each. If a firm makes such statements and are unable to provide evidence to justify them, then they could be considered misleading.
Potential outcomes
"We can write off all your outstanding debt, all previous payments could be returned, and you could keep any goods purchased."
Scale of unenforceability market
“80% of credit agreements are unenforceable”; “50 million credit agreements are created every year, at least 25 million are unenforceable”.
Timescales
"We'll get your credit cards written off within 6 weeks!"; "Fast results guaranteed!"
Questions to ask when contacting either a CMC or solicitor
•what their fees are and what is payable up front per agreement
•whether they take a percentage of any compensation you may receive
•if they are able to represent you in any harassment issues
•will look to see if you have been mis-sold Payment Protection Insurance, often referred to as PPI.
We cover this article in more detail atwww.debtwizard.com together with the links on how to search on claim management companies, more examples of mis-leading adverts from the Ministry of Justice. We also have details of firms that can help you see if you credit agreement is enforceable.
Mike Thomas, former Met officer, now head of debtwizard.com and his team provide advice on debt problems to Officers and support staff. He has clients in more than 80% of the nation’s Police Forces as well as in the Prison, Fire and Rescue, and Ambulance Services, M.O.D, and in other public service departments. He has previously featured on SunTalk, TalkSPORT and BBC radio, as well as ITV, Chanel 5, Sky television and BBC national television news.
This article is intended to afford general guidelines on matters of interest. Accordingly, the information in this article is not intended to serve as legal advice. Therefore, no responsibility can be accepted by debtwizard.com, for any loss occasioned by a person acting or refraining from, acting on the basis of this article. Users are encouraged to consult with professional advisors for advice concerning specific matters before making any decision.
All contents copyright © 2009 Debtwizard.com
